Steps To Follow When Seeking Payment

[Editor's note: At the 2004 Air Conditioning Contractors of America Conference, Chris Colditz, co-owner of Laco Mechanical Services, Palatine, Ill., presented a session titled "Under 15 Employees: Growing and Improving Effectiveness and Image." Due to time constraints, she was unable to provide all of the information she had on her agenda. She agreed to provide The News with her full report. In this, her fourth and final installment, Colditz outlines procedures small businesses should follow to ensure prompt payment.]

Small HVACR firms need to get a big bang out of every dollar spent by the company. The firm needs new customers to grow and better tools to get the jobs finished correctly. It also needs to make a profit.

Think of the whole picture as a process. You spend money advertising wisely. You get the first telephone call from the potential new customer. You make sure you have all the information to properly service that customer.

Setting up the appointment for either a service call or cleaning takes time. Our customers love the "first morning call" and will make an appointment months in advance. This eliminates many Saturday calls, which the "Generation X" tech wants to avoid.

Cell phones have practically eliminated the need for the customer to sit at home and wait. We find out how much travel time the customer needs and then we call when our tech is en route. This also eliminates the frustrating situation of the tech sitting in front of a customer's house and wondering where the customer is.

Once on the jobsite, that professional process must continue. If you charge a diagnosis fee, make sure the diagnosis is complete or the customer knows why it isn't complete. Techs must call the correct distributor if an OEM part is required, especially on older equipment. A customer can make a better decision to replace the unit when the customer knows it must have an OEM part that is out of stock.

Also note whether the part is under any warranty. A pleasantly surprised customer, who doesn't know about the five-year warranty on parts, should immediately perceive your honesty and give you more trust.

The Ins And Outs Of Invoices

Make sure your invoices have space for customers to authorize parts and write the total cost (flat rate is suggested) on the invoice. Verbally quoting prices leads to slow payment and such chilling comments as, "I thought you said..." When you put the total cost in writing and they sign or initial it, you are stopping any potential negotiation or discussion.

On the company's copy of the invoice, the tech needs to note any special tools needed or the specifics of the material needed. Further, a picture, either Polaroid or digital, should be taken when the proposed work is complex.

For pricing any repair jobs or accessories, we use a short proposal form that can be mailed, faxed, or e-mailed. It contains the scope of work, total cost, warranty, deposit (I always get a deposit for jobs over $500 or for new customers), and their authorization.

Often the customer is given the choice of repair (and clean) or replace. The age and other pertinent information are given in the form. While this slows down the process, the customer tends to feel better.

When the job is done, the tech fills out the invoice right on the job and asks for payment.

If the customer tries to avoid payment, the tech does allow payment to be mailed and leaves a pre-addressed envelope and a card. The card informs the customer of our terms and that interest will be charged after 30 days.

The customer must sign the invoice, which also has our legal terms. We realize that an elderly customer might need someone else to write and sign the check. Some people will only pay by credit card, which we readily accept.

When a customer has not paid within 15 days, a statement is sent. I started including "Due now: $150.00," with the following line stating: "Due after (30 days from date of invoice): $168.00." By doing this, I received most payments within the next 10 days.

At the bottom of the statement is the note: "If payment has been mailed, please accept our thanks." And just below that, it states: "All payments are expected to be received within 30 days of the invoice."

Keep a copy of all statements sent with the original invoice. If 15 days go by without receiving payment, call the customer and note the date and time of the call. Note if you left a message and/or with whom you spoke. You want to document all your efforts to contact the customer. Any collection agency or attorney will help you with your forms, from the invoice to the statement.

Unfortunately, each state differs in what is and is not allowed when collecting. Your chamber of commerce is an excellent resource for finding a collection agency or attorney. You should not need them often, but each contractor has a deadbeat horror story, so be prepared.

Method Of Payment

How do you want the payment to be made? Cash is still the only form of payment that cannot bounce or be cancelled. Don't take comfort in knowing that bouncing a check is illegal. You will still end up in court to press your case. Discuss with your banker the pros and cons of sending an NSF check back to you after the first time or allowing them to be automatically redeposited.

Use the information printed on the customer's check. We make a copy of the check, double check the names, and correct all spelling errors. We double-check the address and phone numbers for accuracy.

Credit cards, of course, are often the preferred choice of customers. Remember that the customer can cancel a credit card payment very easily. You will only be notified after the credit card bank has grabbed back the money out of your checking account. Having a properly signed invoice strengthens your demand for payment.

Once you get the payment process debugged, you will find you have fewer outstanding invoices. Once you and your techs start giving customers all the necessary information to make their best decision, they are more likely to appreciate your services and reward you by paying promptly. What more could you ask for?

Chris Colditz is co-owner of Laco Mechanical Services, Palatine, Ill. She can be reached at 847-358-3300, 847-358-8710 (fax), or ccolditz@lacomech.com.

Publication date: 07/19/2004

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